Solicitors:
Johnson Winter & Slattery (Plaintiffs)
Colin Biggers & Paisley (Defendant)
Bannister Law (Interested Parties)
File Number(s): 2017/366582
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Judgment
By my judgment delivered on 9 February 2018 ([2018] NSWSC 82) I granted leave under s 500(2) of the Corporations Act 2001 (Cth) to Mr and Mrs Mastoris to commence representative proceedings against DSHE Holdings Ltd (recs and mgrs apptd) (in liq) ("DSH"). The application for leave was not opposed by DSH, by its liquidators, but was opposed by Mr and Mrs Findlay, who are the lead Plaintiffs in other representative proceedings that have already been commenced against DSH. Mr and Mrs Findlay were granted leave to appear to oppose the application under r 2.13 of the Supreme Court (Corporations) Rules 1999 (NSW). When I delivered my judgment, Mr and Mrs Mastoris indicated that they sought the costs of that application and Mr and Mrs Findlay indicated that they opposed an order for costs against them. The parties subsequently provided written submissions as to those matters.
Mr and Mrs Mastoris rely on r 2.13(2) of the Supreme Court (Corporations) Rules which relevantly provides that, if the Court considers that the attendance of a person to whom leave has been granted under r 2.13(1) has resulted in additional costs for any party, or the corporation, which should be borne by the person to whom leave was granted, the Court may direct that person to pay those costs.
Mr Williams and Mr Edwards, who appear for Mr and Mrs Mastoris, draw attention to the observations of Barrett J in Re Pan Pharmaceuticals Ltd; Selim v McGrath [2004] NSWSC 129; (2004) 48 ACSR 681 at [18] that:
"Rule 2.13(2) focuses on "additional costs" incurred by a party by reason of the non-party's participation in exercise of the leave granted. It contemplates the making of a costs order against the non-party and in favour of the party put to extra expense by the non-party's decision to become involved. But the order contemplated is one that does no more than cater for incremental expense referable to the non-party's involvement. Rule 2.13(2) thus reflects an assumption that in some cases a party will incur such incremental costs and, no doubt, that in others it will not. Where there are no "additional costs", r 2.13(2) cannot support a costs order in favour of the party against the non-party. The rule thus tends to imply that there should not be a costs order against the non-party except with respect to a party's "additional costs", at least in the ordinary course of events. There is a clear concern to guard against the award of more than one set of costs except where good reason is shown."
In Grocon Constructors Pty Ltd v Kimberley Securities Ltd [2009] NSWSC 691 at [6], Barrett J summarised the effect of that rule as being that:
"A person who elects to participate in proceedings on the r 2.13 basis is not susceptible to a costs order in the ordinary course. Such a person could be ordered to pay costs only in the special circumstances (and to the limited extent) referred to in r 2.13(2) or by reference to the general principles concerning the award of costs against non parties …."
Mr Williams also draws attention to my observation in Re David Ireland Productions Pty Ltd [2014] NSWSC 1411 that an applicant for a costs order in respect of "additional costs" under this rule must show that additional costs were in fact incurred as a result of the intervention and that the Court ought to exercise a discretion to order that it be paid those costs.
The first question is whether Mr and Mrs Findlay's intervention has led Mr and Mrs Mastoris to incur additional costs in the application. Mr and Mrs Mastoris submit that the Court should be satisfied that Mr and Mrs Findlay's intervention has caused them to incur additional costs and that it is appropriate that Mr and Mrs Findlay pay those additional costs. Mr and Mrs Mastoris rely, for that submission, on an affidavit of their solicitor, Mr Johnston, read in the course of the application. Mr and Mrs Mastoris also refer to the circumstances in which Mr and Mrs Findlay were originally granted leave to commence their representative proceedings against DSH and were then granted leave to be heard in opposition to Mr and Mrs Mastoris' application for leave to commence further representative proceedings. Mr and Mrs Mastoris refer to correspondence between the parties' solicitors, in December 2017 and January 2018, in which Mr and Mrs Findlay's solicitors were being pressed to provide written submissions in respect of the application, and written submissions were served on behalf of Mr and Mrs Findlay on the Australia Day public holiday, immediately before the first Corporations List of the new term, on 29 January 2018. The matter was then stood over until the following week when it was heard by me on 5 February 2018.
Mr Williams submits, with substantial force, that but for the intervention of Mr and Mrs Findlay, the application would likely have been determined favourably to Mr and Mrs Mastoris by a Registrar, where the liquidators of DHS had neither consented to nor opposed the grant of leave, in the same manner as Mr and Mrs Findlay's application was determined in their favour on 28 July 2017. It seems to me likely that a Registrar, or a Judge to whom the matter was referred, would still have had to consider the question whether leave should be granted for further representative proceedings, addressing some of the issues and some of the case law to which I referred in my judgment, but that consideration would have been less time consuming in the absence of the comprehensive, but ultimately unsuccessful, submissions put by Mr and Mrs Findlay as to that matter.
Mr and Mrs Mastoris fairly accept that certain costs of and incidental to their application are not "additional" costs, including the costs of preparing the application and its original supporting affidavit, and the second and fourth affidavits of their solicitor which placed proposed Statements of Claim in evidence, and they also accept that it would have been necessary to appear before the Registrar on 29 December 2017. However, they submit that their costs of preparation of detailed written submissions, briefing Senior Counsel, further evidence and preparation of and participation in a contested hearing, beyond those costs, were "additional" costs occasioned by the intervention of Mr and Mrs Findlay.
Mr and Mrs Mastoris also submit that the costs of the Defendants which they have been required to pay, beyond those of one appearance before a Registrar and the review of the application and first, second and fourth affidavits of Mr and Mrs Mastoris' solicitor and their exhibits, are also additional costs to which they have been put by Mr and Mrs Findlay's intervention. I accept that Mr and Mrs Findlay should pay the costs which Mr and Mrs Mastoris are required to pay the Defendant, but on the more limited basis noted below.
Mr and Mrs Findlay respond that their attendance at the Plaintiffs' application did not result in the additional costs being incurred by the parties prior to 5 February 2018. Mr and Mrs Findlay submit, and I accept, that their intervention did not lead to substantial additional costs in respect of the Plaintiffs' written submissions dated 11 December 2017, which were largely directed to matters which would need to have been addressed in respect of the background to the application. Mr and Mrs Findlay submit that the application was not heard on 12 December 2017 by reason of the Plaintiffs' delay in serving the Statement of Claim on both the liquidators and Mr and Mrs Findlay. I accept that submission, so far as at least the liquidators were not likely to have determined their position without review of the Statement of Claim. Counsel for the liquidator, in appearing on 12 December 2017, had noted that the consequence of Mr and Mrs Mastoris' application would be that DSH would face two representative proceedings rather than one, and that the liquidator needed some time to consider that application. I am satisfied, on that basis that the application would not have been determined until early in the term in 2018, irrespective of any intervention by Mr and Mrs Findlay.
The second question is whether the Court should exercise a discretion to order that Mr and Mrs Findlay pay the additional costs that Mr and Mrs Mastoris have incurred. Mr and Mrs Findlay submit that the usual position is that a person heard in proceedings under rule 2.13 will neither be awarded costs nor have an order for costs made against them: Re TEN Network Holdings Ltd (admin apptd) (recs & Mgrs apptd) [2017] NSWSC 1359 at [15]. However, that position is not invariable, and will depend upon the extent to which that person's intervention is justified and the extent to which he or she adopts the role of an opponent to the application. For example, in Yeo v Australian Securities and Investments Commission [2018] FCA 37 at [15], Gleeson J ordered that an intervening party pay the costs of an application where he chose to take an active contradicting position in opposition to the application, and his position was "analogous to an unsuccessful litigant who, in the ordinary course, is ordered to pay the costs of his unsuccessful opposition".
Mr and Mrs Mastoris submit that, so far as Mr and Mrs Findlay actively opposed the application, the Court should exercise its discretion to order that they pay the additional costs of the application. Mr and Mrs Mastoris submit, and I accept, that Mr and Mrs Findlay would not have been surprised by that outcome. That view is reinforced, although it does not depend upon, the correspondence sent by the solicitors for the liquidator and for Mr and Mrs Mastoris that had drawn Mr and Mrs Findlay's attention to the additional costs and delays which were likely to result from their intervention.
Mr and Mrs Findlay respond that they should bear their own costs and should not bear the costs of any other party to the Plaintiffs' application, on 5 February 2018, due to the "novel issues" that arose and their "necessary position" as contradictor in light of those issues. Mr and Mrs Findlay also submit that the application raised novel and important questions of law relating to the intersection of overlapping class actions and leave to proceed under s 500(2) of the Corporations Act, which required full argument, which was provided by Mr and Mrs Findlay in their role as an interested party.
I accept that the issues raised were novel, at least in the sense that an application for leave under s 500 of the Corporations Act had not previously been opposed on the basis on which Mr and Mrs Findlay opposed it. I do not accept that full argument was a necessity, where that argument would not have been required had Mr and Mrs Findlay accepted the view for which Mr and Mrs Mastoris contended, which I ultimately accepted in the judgment. I also do not accept that a contradictor to the application was necessary, in circumstances that the interests of affected parties would have been sufficiently protected by the liquidators of DHS, although they elected neither to consent to nor oppose the application. The Court would not have proceeded in any error in granting leave in Mr and Mrs Findlay's absence, and on the straightforward basis that any question of overlap between the two representative actions could be addressed in the management of the two proceedings.
I am satisfied that an order for additional costs should be made in favour of Mr and Mrs Mastoris. It seems to me that the preferable way to formulate the costs orders is by specifying additional costs referable to Mr and Mrs Findlay's involvement, by reference to the costs of and incidental to the hearing before me on 5 February 2018. I am not satisfied that the costs of Mr and Mrs Mastoris' filing of further affidavit evidence to meet Mr and Mrs Findlay's application is sufficiently material to warrant a specific costs order in that respect. Neither party has sustained the position for which it contended in the costs application in full, and there should be no order as to the costs of this application.
Accordingly, I make the following orders:
Pursuant to r 2.13(2) of the Supreme Court (Corporations) Rules 1999 (NSW), order that David Findlay and Marian Findlay pay to the Plaintiffs:
(a) the costs of the Plaintiffs of and incidental to the hearing before Black J on 5 February 2018, as agreed or as assessed on the party/party basis; and
(b) the costs of the Defendant, of and incidental to the hearing before Black J on 5 February 2018, that the Plaintiffs have been ordered to pay pursuant to order 3 of the orders made on 5 February 2018.
There be no order as to the costs of this costs application.
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Decision last updated: 08 March 2018